What is compounding?

Compounding means your money grows, and then the growth grows too.

Put £100 somewhere that grows 5% a year. After one year you have £105. The next year you earn 5% on £105, not just £100, so you get £110.25. Each year the pile you're growing is a little bigger.

After 10 years that £100 becomes about £163, without adding a penny. After 30 years, about £432.

The Rule of 72

Divide 72 by the yearly growth %. The answer is roughly how many years it takes to double your money. At 6% a year: 72 ÷ 6 = about 12 years.

Time beats size

Starting early matters more than starting big, because compounding needs years to do its magic. Someone who saves a little from their teens can end up ahead of someone who saves much more but starts later.

The trap: compounding daily wins

"Just 1% a day" sounds small, but compounded over a year it would turn £1 into about £12. Nobody keeps that up. Warren Buffett, one of the best investors ever, averaged about 19.9% a year for 60 years. Chasing huge daily wins is how people take bigger and bigger risks, and lose.

Learn it by playing, with pretend money.

Free games for ages 8 to 18, and parents too. Not betting, not gambling.